Tax & Trade Blog
CBSA Update: 2019 Trade Compliance Verification
The Canada Border Services Agency (CBSA) is responsible for reviewing imports to ensure compliance with Canada’s trade laws. In doing so, the CBSA sometimes focuses on what it deems “audit priority” areas. These are tariff classification codes where the agency believes that there is significant risk for misclassified imports under the Customs Tariff, which leads to the unlawful evasion of duties on those goods.
The CBSA recently released its next round of 2019 Trade Compliance Verifications, which dealt with a number of these priority areas.
In the report, the following “audit priority” areas had updated enforcement information, leading to several million dollars in fines and penalties for importers who misclassified their goods.
Furniture for Non-Domestic Purposes – Headings 94.01 (Seats) and 94.03 (Other furniture and parts thereof) classify furniture for domestic purposes or non-domestic purposes. The CBSA identified the risk in 2013 that goods may be misclassified as furniture for non-domestic purposes (which is duty free) instead of domestic purposes (duty rate up to 9.5%).
In the release, the CBSA announced that it had targeted 30 companies and had found a 96% non-compliance rate—leading to $1,119,743 in self adjustments, and $35,800 in penalties.
Footwear ($30 or more per pair) – The risk was that goods could be misclassified within 64.03 which generally attracts a duty rate of 11% compared to e.g. women’s footwear (valued at $30 or more per pair), which has a duty rate of 11%.
The CBSA announced that it had targeted 186 companies since 2014 and had found a 75% non-compliance rate—leading to $1,658,685 in self adjustments, and $77,600 in penalties.
Articles of Plastics – The risk was that plastics could be misclassified within heading 39.26, which had a lower duty rate of 6.5% instead of elsewhere in the same heading which had higher rates.
The CBSA announced that it had targeted 22 companies since 2015 and had found a 95% non-compliance rate—leading to $348,241 in self adjustments, and $34,600 in penalties.
Parts of Lamps – The risk was that goods could be misclassified as parts of lamps under 94.05 instead of elsewhere within the same heading or other chapters.
The CBSA announced that it had targeted 150 companies since 2017 and had found a 69% non-compliance rate—leading to $846,371 in self adjustments, and $43,350 in penalties.
Safety Headgear – The risk was that safety headgear could be misclassified under 6506.10 which is duty free, compared to other safety headgear under 6506.10.90 which has a duty rate of 8.5%.
The CBSA announced that it had targeted 31 companies since 2017 and had found a 75% non-compliance rate—leading to $430,236 in self adjustments, and $45,850 in penalties.
Import Permit Numbers – the risk here was that certain imported meat and dairy products could be misclassified as “within access commitment” tariff items which meant that they did not require an import permit number, dodging the quota system that governs those products.
The CBSA announced that it had targeted 174 companies since 2017 and had found a 34% non-compliance rate—leading to $4,103 in self adjustments, and $56,050 in penalties.
The takeaway point is that importers need to be cognizant of where their goods actually fit within the Customs Tariff. Failure to properly classify goods can lead to big penalties—especially if your goods fall within “audit priority” areas. If your business imports goods related to any of the “audit priorities” listed in the announcement, you should expect to see greater CBSA enforcement in this area and seek professional advice as appropriate.
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